“The execution of our strategic priorities is off to a strong start in 2019. We continued to invest in our industry leading manufacturing capacity, providing customers with value-added solutions to fulfill their most important homebuilding needs. Additionally, our operational efficiency initiatives are producing tangible results through a more agile and efficient operating platform. I am extremely pleased with our team’s outperformance and solid earnings growth in a challenging quarter,” said CEO Chad Crow.

One less sales day in the first quarter of 2019 reduced sales by 1.6 percent

Estimated sales volume per day grew by 6.8 percent, led by 10.0 percent volume growth in the value-added product categories

Adjusted EBITDA margin increased by 130 basis points

Adjusted Net Income increased by 44 percent

The Company has provided supplemental non-GAAP financial information for the consolidated company that is adjusted to exclude one-time integration, one-time refinancing, and other costs (“Adjusted”). As the information included herein includes non-GAAP financial information, please refer to the accompanying financial schedules for non-GAAP reconciliations to their GAAP equivalents.

First Quarter 2019 Compared to First Quarter 2018:

Net Sales

Net sales for the first quarter ending March 31, 2019 were $1.6 billion, a 4.1 percent decrease compared to a year ago. Lumber and lumber sheet goods sales were down 19.6 percent primarily as a result of the deflation in commodity prices as compared to the same period a year ago. We achieved increased sales in our remaining core product categories largely due to higher sales volume.

Net sales per day declined by 2.5 percent primarily due to commodity deflation, which depressed sales by 9.3 percent. However, including the impact of commodity deflation, value-added product sales per day grew by 8.8 percent, including sales growth of 8.1 percent in the Windows, Doors, and Millwork category and 9.6 percent in Manufactured Products.

Estimated sales volume per day grew by 6.8 percent as demand grew across our three customer end markets. Single-family grew by 7.5 percent, repair and remodel / other by 5.2 percent and multi-family by 4.1 percent.

Gross Margin

Gross margin was $442.0 million, an increase of $30.9 million, or 7.5 percent, over the prior year. Gross margin percentage was 27.1 percent, an expansion of approximately 290 basis points compared to the prior year period. The margin percentage increase was attributable to the decline in the cost of commodities relative to our customer pricing commitments as well as continued pricing discipline. Additionally, growth in the value-added product categories resulted in an improved mix versus the prior year period.

SG&A in the first quarter of 2019 was $370.1 million, an increase of approximately $11.2 million primarily due to increases in variable compensation related to increased profitability as well as an increase in insurance costs.

As a percentage of sales, SG&A increased by 160 basis points to 22.7 percent mainly as a result of the decreased net sales due to commodity deflation as well as the factors described above.

Interest Expense

Interest expense decreased by $1.8 million to $24.9 million compared to the same period last year. The year over year reduction is largely due to the repurchases of the 2024 notes executed in the fourth quarter of 2018 and the first quarter of 2019. The transactions also resulted in a gain on debt extinguishment in the amount of $0.7 million which lowered interest expense.

Income Tax Expense

Income tax expense in the first quarter of 2019 was $11.3 million or an effective tax rate of approximately 24.0 percent. In the same period the prior year, income tax expense was $2.2 million primarily due to the effect of stock compensation windfall benefits.

Adjusted Net Income

Net income was $35.7 million, or $0.31 per diluted share, compared to $23.2 million, or $0.20 per diluted share, in the same period a year ago.

Adjusted net income was $39.8 million, or $0.34 per diluted share, compared to $27.6 million, or $0.24 per diluted share, in the first quarter of 2018. The increase of $12.2 million, or 44.2 percent, was primarily driven by increased sales volume, improved profitability and lower interest expense.

Adjusted EBITDA

Adjusted EBITDA grew $18.3 million to $100.9 million, an increase of 22.2 percent. The increase was largely driven by the increase in sales volume, particularly in the value-added product categories, combined with the increased gross margin percentage. As a result, Adjusted EBITDA improved to 6.2 percent of sales in the first quarter from 4.9 percent in the same period a year ago.

Capital Structure, Leverage, and Liquidity Information:

Adjusted EBITDA, on a trailing twelve-month basis, was $519.9 million and net debt was $1,582.4 million as of March 31, 2019. The leverage ratio decreased from 4.6x net debt / Adjusted EBITDA at the end of the first quarter of 2018 to 3.0x as of March 31, 2019, a reduction of 1.6x and in line with the Company’s balance sheet management target of between 2.5x and 3.5x.

Due to seasonal working capital needs, net cash used in operations and investing was $14.7 million. We expect to generate $190-220 million in cash from operations and investing in 2019, in-line with the Company's full year cash flow guidance.

Liquidity as of March 31, 2019 was $585.9 million, consisting of net borrowing availability under the revolving credit facility and cash on hand.

Please refer to the accompanying financial schedules for more information.

Outlook

“Our team demonstrated the breadth, diversity and strength of our platform in a challenging first quarter. The fundamentals of demand for housing remain intact as we move into the spring sales season. Although commodity prices will be a headwind compared to last year, our fifteen thousand team members are focused on above market growth and exceptional service to our customers across our national footprint. This includes executing on our strategic initiatives in value-added products and our operational excellence programs. I want to thank our team members who enabled us to deliver value to our customers and excellent financial results to our shareholders,” concluded Mr. Crow.

Conference CallBuilders FirstSource will host a conference call Friday, May 3, 2019 at 9:00 a.m. Central Time (CT) and will simultaneously broadcast it live on the Internet. The earnings release presentation will be posted at www.bldr.com under the “investors” section after the market closes on Thursday, May 2nd. To participate in the teleconference, please dial into the call a few minutes before the start time: 800-263-0877 (U.S. and Canada) and 323-794-2094 (international), Conference ID: 1017206. A replay of the call will be available at 1:00 p.m. Central Time through May 18th.To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international) and refer to pass code 1017206. The live webcast and archived replay can also be accessed on the Company's website at www.bldr.com under the “Investors” section. The online archive of the webcast will be available for approximately 90 days.

Headquartered in Dallas, Texas, Builders FirstSource is the largest U.S supplier of building products, prefabricated components, and value-added services to the professional market segment for new residential construction and repair and remodeling. We provide customers an integrated homebuilding solution, offering manufacturing, supply, delivery and installation of a full range of structural and related building products. We operate in 39 states with approximately 400 locations and have a market presence in 75 of the top 100 Metropolitan Statistical Areas, providing geographic diversity and balanced end market exposure. We service customers from strategically located distribution facilities and manufacturing facilities (some of which are co-located) that produce value-added products such as roof and floor trusses, wall panels, stairs, vinyl windows, custom millwork and pre-hung doors. Builders FirstSource also distributes dimensional lumber and lumber sheet goods, millwork, windows, interior and exterior doors, and other building products. For more information about Builders FirstSource, visit the Company’s website at www.bldr.com.

Cautionary NoticeStatements in this news release and the schedules hereto that are not purely historical facts or that necessarily depend upon future events, including statements about expected market share gains, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. In addition, oral statements made by our directors, officers and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements. As with the forward-looking statements included in this release, these forward-looking statements are by nature inherently uncertain, and actual results may differ materially as a result of many factors. All forward-looking statements are based upon information available to Builders FirstSource, Inc. on the date this release was submitted. Builders FirstSource, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to the Company’s growth strategies, including gaining market share, or the Company’s revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy. Builders FirstSource, Inc. may not succeed in addressing these and other risks. Further information regarding factors that could affect our financial and other results can be found in the risk factors section of Builders FirstSource, Inc.’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein.

Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization

23,576

22,819

Amortization of debt issuance costs and debt discount

1,149

1,149

Gain on extinguishment of debt

(680

)

—

Deferred income taxes

9,638

1,497

Stock compensation expense

2,659

2,890

Gain on sale of assets

(464

)

(245

)

Changes in assets and liabilities:

Receivables

22,703

(57,132

)

Inventories

(38,603

)

(85,958

)

Other current assets

4,732

(9,481

)

Other assets and liabilities

(1,319

)

1,552

Accounts payable

47,371

4,376

Accrued liabilities

(100,395

)

(83,012

)

Net cash provided by (used in) operating activities

6,075

(178,325

)

Cash flows from investing activities:

Purchases of property, plant and equipment

(21,524

)

(20,113

)

Proceeds from sale of property, plant and equipment

720

568

Net cash used in investing activities

(20,804

)

(19,545

)

Cash flows from financing activities:

Borrowings under revolving credit facility

374,000

555,000

Repayments under revolving credit facility

(331,000

)

(399,000

)

Repayments of long-term debt and other loans

(24,440

)

(2,780

)

Exercise of stock options

216

2,041

Repurchase of common stock

(2,450

)

(4,855

)

Net cash provided by financing activities

16,326

150,406

Net change in cash and cash equivalents

1,597

(47,464

)

Cash and cash equivalents at beginning of period

10,127

57,533

Cash and cash equivalents at end of period

$

11,724

$

10,069

Supplemental disclosure of non-cash activities

Purchases of property, plant and equipment included in accounts payable were $1.9 million and $3.2 million for the three months ended March 31, 2019 and 2018, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Reconciliation of Adjusted Non-GAAP Financial Measures to their GAAP Equivalents

(unaudited)

Note: The company provided detailed explanations of these non-GAAP financial measures in its Form 8-K filed with the Securities and Exchange Commission on May 2, 2019.

Three months ended March 31,

Twelve months ended March 31,

2019

2018

2019

(in millions)

Reconciliation to Adjusted EBITDA:

GAAP Net Income

$

35.7

$

23.2

$

217.7

Integration related expenses

4.8

4.4

19.6

Debt issuance and refinancing cost (1)

(0.7)

-

(3.9)

Adjusted Net Income

39.8

27.6

233.4

Weighted average diluted common shares (in millions)

116.5

116.7

Diluted adjusted net income per share:

$

0.34

$

0.24

Reconciling items:

Depreciation and amortization expense

23.6

22.8

98.7

Interest expense, net

25.6

26.7

110.3

Income tax (benefit) expense

11.3

2.2

64.7

Stock compensation expense

2.7

2.9

14.2

(Gain)/loss on sale and asset impairments

(0.4)

0.2

(1.6)

Other management-identified adjustments (2)

(1.7)

0.2

0.2

Adjusted EBITDA

$

100.9

$

82.6

$

519.9

Adjusted EBITDA Margin

6.2%

4.9%

6.8%

(1) Gains associated with extinguishing long term debt in 2019 and 2018.

(2) Primarily relates to severance and one time cost.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Financial Data

(adjusted and unaudited)

Three months ended March 31,

2019

2018

(in millions except per share amounts)

Net sales

1,631.3

1,700.4

Cost of sales

1,189.3

1,289.4

Gross margin

442.0

411.0

Gross margin %

27.1%

24.2%

Adjusted SG&A/Other (excluding depreciation and amortization) as a % of sales (1)

20.9%

19.3%

Adjusted EBITDA

100.9

82.6

Adjusted EBITDA margin %

6.2%

4.9%

Depreciation and amortization

(23.6)

(22.8)

Interest expense, net of debt issuance cost and refinancing

(25.6)

(26.7)

Income tax expense

(11.3)

(2.2)

Other adjustments

(0.6)

(3.3)

Adjusted Net Income

$

39.8

$

27.6

Basic adjusted net income per share:

$

0.34

$

0.24

Diluted adjusted net income per share:

$

0.34

$

0.24

Weighted average common shares (in millions)

Basic

115.4

114.1

Diluted

116.5

116.7

Note: The company provided detailed explanations of these non-GAAP financial measures in its Form 8-K filed with the Securities and Exchange Commission on May 2, 2019.

(1) Adjusted SG&A and other as a percentage of sales is defined as GAAP SG&A less depreciation and amortization, stock comp, acquisition, integration and other expenses. GAAP SG&A in Q1-19 of $370.1M less $23.6M depreciation and amortization, less $4.8M of integration expenses, less $2.7M of stock comp and plus $2.1M gain from sales, and amortization, less $4.8M of integration expenses, less $2.7M of stock comp and plus $2.1M gain from sales, impairments, and other.

All qualified applicants will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, protected veteran status or status as an individual with a disability.

In compliance with the ADA Amendments Act (ADAAA), if you have a disability and would like to request an accommodation in order to apply for a position with Builders FirstSource, please call (214) 765-3990 or email: ADA.Accommodation@bldr.com. Please do not send resumes to this email address – it is intended only to be used to request an accommodation in submitting an application for a job opening.